Definition
Financial contracts that give the buyer the right, but not the obligation, to buy (call option) or sell (put option) an underlying asset at a specified price (strike price) before or at a specific expiration date. Option sellers receive a premium for taking on the obligation to fulfill the contract if exercised.
Example Usage
"The investor purchased call options on the stock to benefit from potential price increases while limiting downside risk to just the premium paid.”
Related Terms
Risk TransferFuturesCallsPutsStrike PricePremiumDerivatives MarketsHedgingDerivatives
Tags
DerivativesRisk ManagementTrading Strategy
Course Module
Module 1: Introduction to Financial Markets